International Insolvency: The bankruptcy of the Hanjin Shipping

The bankruptcy of the Hanjin Shipping

By the end of August 2016, Hanjin Shipping, the world’s seventh largest container shipping company and number one in Korea, filed for bankruptcy protection, one day after creditor banks pulled their support for the loss-making shipping company which had some $5bn in debt.

Some experts believe that the company had a working capital lower than required for its level of business activity, which led to a growing lack of payment to suppliers.

The bankruptcy was the biggest ever to hit the container shipping sector in over 50 years of its existence and sent shockwaves through the industry and the wider supply. Hanjin Shipping accounted for about 3% of global container liner capacity. This collapse was nonetheless totally unprecedented, especially since all big container lines are linked to each other in some form of partnership. The shock rippled through the global transportation industry and supply chains.

This came as no surprise to the international logistics industry, since container lines have witnessed some pretty rough years due to a drop in freight rates (low demand and oversupply of ships), which resulted in extremely low prices and continuous efforts to boost profitability.

Furthermore, there was the question of what to do with Hanjin’s assets. Through bankruptcy procedure, most assets were to be purchased at a discount price. The South Korean government allocated $5.6 million to support the shipping industry and helped other local companies to absorb Hanjin’s assets. Hyundai Merchant Marine (HMM) purchased 20% of California’s